Covid: Indian economy to contract 9% this fiscal, says report

Asian Development Bank’s (ADB’s) move follows rating agency S&P Global Ratings on Monday forecasting a 9% contraction in the Indian economy in FY21.

The Asian Development Bank (ADB) on Tuesday projected the Indian economy to contract 9% this fiscal, deeper than its June estimate of 4%, saying the fast-spreading coronavirus is hindering economic activity and consumer sentiment.

“India imposed strict lockdown measures to contain the spread of the pandemic, and this has had a severe impact on economic activity,” ADB chief economist Yasuyuki Sawada said in a statement. (Bloomberg file photo. Representative image)

The multilateral bank, however, expects GDP to rebound next fiscal with an 8% growth.

ADB’s move follows rating agency S&P Global Ratings on Monday forecasting a 9% contraction in the Indian economy in FY21. Fitch Ratings and Moody’s Investors Service have also lowered their estimates for FY21 to a contraction of 14.8% and 11.5%, respectively, while investment bank Goldman Sachs has forecast GDP to shrink by 10.5% this fiscal.

“India imposed strict lockdown measures to contain the spread of the pandemic, and this has had a severe impact on economic activity,” ADB chief economist Yasuyuki Sawada said in a statement.

“It is crucial that containment measures such as robust testing, tracking, and ensuring treatment capacities, are implemented consistently and effectively.”

The Manila-based bank said steps taken by the Indian government to address the pandemic, including a rural employment guarantee programme and other social protection measures, will aid rural incomes protecting the vulnerable people, but private consumption may continue to suffer.